IPEC pacifies irate insurers

WHEN his daughter was born in 1989, Misheck Tshuma opened an endowment policy with a local life assurance firm. He was positive he would not be forced to fork out university fees in his old age.
But 19 years on in 2008, everything he had spent years putting aside for his daughter’s tertiary education was wiped away after the domestic currency hit the skids in the 2008 hyper-inflationary period.
“Right now, my daughter just graduated with her Master’s Degree which she had to pay for herself. While I was able to pay fees for her undergraduate education, I could not pay for her post-grad studies.
“Everything would have been different had my savings not been wiped out in 2008. It is very unlikely that I will ever trust insurance companies and banks,” Tshuma told The Financial Gazette of the sidelines of Insurance Awareness Day Commemorations in Gweru by IPEC over the weekend.
Tshuma’s story is not unique.
Thousands of Zimbabweans ― who distrust the country’s financial system ― have vowed to never put their investments into the coffers of financial institutions after life savings vanished in 2008.
The Insurance and Pensions Commission (IPEC), the industry regulator’s pensions manager Nhau Chivingira, told The Financial Gazette that when hyperinflation ravaged Zimbabwe, insurers were not protected.
“It was an issue of confidence in the financial services sector in genera l… there was an issue of low values for monies locked in the formal sector and that money was demonetised…
“Because of that, people had certain reservations … Asset and liability matching is a regulatory requirement,” Chivingira said.
The IPEC manager highlighted that during the 2008 crisis, the country did not have a dedicated regulator enforcing the asset and liability management practices as IPEC was only formed in 2006.
He also highlighted that IPEC was now fully-equipped to protect insurers following legal and statutory instruments giving it powers to prosecute fraudulent insurers.
“Yes, we can assure the country that they can invest in these products, there is a regulator enforcing good investment principles so their monies will not be wiped out by inflation.
“IPEC issued a standard into the market in 2013, Circular 1 and Circular 2 of 2013. What these two statutes do is they force insurance companies and pension funds to spread their balance sheet or investment portfolios in a certain way that is in line with the liabilities which they manage,” Chivingira said.
Another Gweru resident, Muchaneta Makwara, told The Financial Gazette that while she would love to have faith in local insurance companies, they continued to short-change clients.
“I have to fight with them to have my pension paid out, now how can you even trust such people with more money?” Makwara fumed.
However, Zimnat Life chief operating officer, Elizabeth Rabvukwa, recently told reporters in the capital that IPEC now approved all products before they hit the market, thereby insulating clients against inflationary risks.
“I know most Zimbabweans still have fresh memories of 2008 but the industry is different now because there is a regulator who looks into all products before they are introduced. So, as long as IPEC is there, it is unlikely the 2008 scenario will happen again,” Rabvukwa said at an IPEC-ZimSelector workshop.
The local banking sector has suffered similar distrust from depositors following the hyperinflation that wiped away bank balances and life savings.
Both insurance and banking sector players are in a hurry to create a better perception with clients, however, experts believe it will take more practise than talk for the situation to normalise.
IPEC has been encouraging life assurers to mitigate against inflationary risks by investing in long-term assets like properties to match the liabilities and withstand all economic challenges that can happen in the short term.
These strategies to hedge against inflation have proven effective in other countries.
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